Correlation Between Hasbro and ServiceNow

Can any of the company-specific risk be diversified away by investing in both Hasbro and ServiceNow at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hasbro and ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hasbro Inc and ServiceNow, you can compare the effects of market volatilities on Hasbro and ServiceNow and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hasbro with a short position of ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hasbro and ServiceNow.

Diversification Opportunities for Hasbro and ServiceNow

-0.66

Correlation Coefficient

Hasbro  ServiceNow

Excellent diversification

The 3 months correlation between Hasbro and ServiceNow is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hasbro Inc and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow and Hasbro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hasbro Inc are associated (or correlated) with ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of Hasbro i.e., Hasbro and ServiceNow go up and down completely randomly.

Pair Corralation between Hasbro and ServiceNow

Considering the 90-day investment horizon Hasbro is expected to generate 1.67 times less return on investment than ServiceNow. But when comparing it to its historical volatility, Hasbro Inc is 1.19 times less risky than ServiceNow. It trades about 0.07 of its potential returns per unit of risk. ServiceNow is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  70,372  in ServiceNow on September 12, 2024 and sell it today you would earn a total of  42,412  from holding ServiceNow or generate 60.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hasbro Inc  vs.  ServiceNow

Hasbro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hasbro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hasbro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ServiceNow

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hasbro and ServiceNow

The main advantage of trading using opposite Hasbro and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hasbro position performs unexpectedly, ServiceNow can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ServiceNow will offset losses from the drop in ServiceNow's long position.

The idea behind Hasbro Inc and ServiceNow pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.